Panama Canal: The Effects of Transitioning Power from the United States to Panama

Isabel Hancock History of Latin America and the Caribbean Spring 2013

In the late 1970s, demands began to grow for the United States to sign over power of the Panama Canal to the Panamanian government. Advocates for a new Panama Canal treaty argued that the United States must reconsider the history of the canal from the Panamanian point of view. Panamanians long understood that the United States rights to the canal had been secured by aggression and military tactics, which did not give the United States the rights to maintain control of the canal forty years later. The 1977 Torrijos-Carter Treaties, which led to full Panamanian control of the Panama Canal from the United States, was a controversial risk that most scholars believe paid off positively and created immediate political stabilization, economic growth, and increased nationalism in Panama. The 1903 Hay-Bunau-Varilla Treaty established the Panama Canal Zone and the subsequent construction of the Panama Canal. In following years many Panamanians began to refer to it as, the treaty that no Panamanian signed."1 In the decades that followed, the injustice embedded in the original treaty was built into Panamas spatial, political, and social landscape. By the 1970s, the Canal Zone was home to approximately 40,000 United States citizens.2 The Canal Zone had an American police force, post offices, and was under the provenance of United States law.3 This distinction added a basis to the argument for a new United States-Panama treaty. Coqui Caldern, a Panamanian painter and historian stated, For a century, we didn't have a lot to say. Now the fact that the canal is administered by Panamanians is a great success and an important

Zaretsky, Natasha. "Restraint Or Retreat? The Debate Over The Panama Canal Treaties and U.S. Nationalism After Vietnam." Diplomatic History 35.3 (2011): 535. Advanced Placement Source. Web. 9 Apr. 2013. 2 Zaretsky. 3 Ibid.

source of revenue for our small country.4 The success of the canal became apparent in just the first few years after the transfer of power. This success was arguably evident for a brief time in the political scene of Panama. The transfer of control of the Panama Canal came at a time of military dictatorship. Omar Torrijos was selected to rule after a military coup in 1968 rearranged political control of the country.5 Mark Falcoff, a Latin American scholar at the American Enterprise Institute in Washington, D.C., argues that Torrijos himself was not incredibly influential in the decisions behind the Torrijos-Carter Treaties, but being in power during the time of the Panama Canal negotiations provided him with increased support and respect from the general population of Panama. Falcoff argues that when Torrijos signed the treaties he gave much more cohesion to his coalition, and politics in Panama were stable for a few years.6 However Torrijos unexpected death in 1981 threw Panama into a full-blown succession crisis, with the canal at a considerably less important position since it was already in Panamas control. Currently, the government primarily only plays a role in the operations of the canal, which scholars believe have actually improved since the treaties. Many United States government officials were afraid that once the transfer of power was complete, many of the operations for the canal would be impeded. However, Mark Falcoff says, "the gamble the United States took in turning the canal over has paid off brilliantly."7 Falcoff believes the canal not only gave incredible opportunity to the Panamanian work

Bianco, Adriana. "Coqui Caldern." Americas 63.6 (2011): 58. Advanced Placement Source. Web. 9 Apr. 2013. 5 Falcoff, pg 40. 6 Falcoff, pg 41. 7 Cullen, Bob. "A Man, A Plan, A Canal: Panama Rises." Smithsonian 34.12 (2004): 44. Advanced Placement Source. Web. 8 Apr. 2013.

force, but also helped to unify a very economically polarized nation.8 Bob Cullen, a scholar who writes for the Smithsonian, also argues that the operations for the canal have not been impeded, and states, Panama is running the Canal as efficiently as the United States.9 Bob Cullen continues to cite his reason for the smooth transfer was that Panama, over the years, had created a queue of American-trained specialists, who would be able to take over major operations in the years following the Torrijos-Carter Treaties.10 This is the case for Lockmaster Dagoberto DelVasto who says, "I started out as a janitor. At that time, most of the lockmasters were Americans. I went to an apprentice school and graduated as an electrician. Now I supervise 20 men."11 DelVastos story is similar to many other Panamanians, as they were able to receive training and preparation for the multitude of jobs that were opening up. Throughout the 1980s and 1990s, Panamanian administrators and workers were slowly phased in to assume North American responsibilities along the Canal.12 For many Panamanian citizens, the transfer of control provided by the treaties allowed for various job opportunities that were previously unavailable. This includes jobs in the Canal Zone, not relating to Canal operations, such as working at the many commercial businesses. These businesses where exclusively run by Americans. However, the Torrijos-Carter Treaties allowed for American citizens to only have jobs relating directly to the canal

8 9

Falcoff, pg 41. Cullen. 10 Ibid. 11 Ibid. 12 LaFeber, Walter. The Panama Canal: The Crisis in Historical Perspective. New York: Oxford UP, 1978. Print. Pg 205.

operations, thus opening these commercial businesses to be run by Panamanians who could not find work on the canal itself.13 The decision for transferring power of the Canal through the Torrijos-Carter Treaties was much less controversial in Panama as it was in the United States. Panamanians always sought after control of the canal, whether for economic, political, and nationalistic reasons. The issue was much more controversial in the United States. Natasha Zaretsky, a history professor, cites that the Cold War tendencies were a main drive for United States politicians to feel that they must maintain control of the Canal.14 There was fear from many politicians that if the United States gave up control, then Communist governments would interfere and attempt to claim the canal. The Panama Canal represented a piece of national United States history, and many politicians also believed that it needed to be preserved and maintained by the same government that built it.15 Despite the opposing arguments, the Carter administrations belief, that there were not enough reasons to justify their control of the canal, won in this debate, and Torrijos-Carter Treaties were signed on September 7, 1977. The TorrijosCarter Treaties consisted of two separate treaties, with one stating that as of December 31, 1999 Panama would assume full control of canal operations and became primarily responsible for its defense, while the other stated that the U.S. retained the permanent right to defend the canal from any threat to its neutrality.16 The United States have not needed to invoke the second treaty, however it does maintain a haunting presence over the canal and many Panamanians are not in favor of that continued presence.

LaFeber, pg 250. Zaretsky, pg 538. 15 Ibid. 16LaFeber, pg 250

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The desire for the Panama Canal was fueled, in part, by the Panamanian nationalist movements. These movements developed long before the Hay-Bunau-Varilla treaty in 1903, and only grew in intensity from that point on.17 Walter LaFeber, a historian on U.S. foreign relations, argues that Panamanians increasingly resented the division of their country by the Canal Zone, as well as the anti-Panamanian discrimination that occurred in the Canal Zone.18 Coqui Caldern argues that this national awareness of the division is still evident in many Panamians today. She states, "Panama's geographic separation into two parts creates an awareness of a divided land-united world, a concept that many Panamanians carry in their thoughts."19 Coqui Caldern also argues that the increase in artwork and art appreciation in Panama is a demonstration of the national pride and spirit, which has increased since control of the Panama Canal was passed to her country.20 Walter LaFeber argues that the more important driving factor for the Panamanian government was the economy.21 Over the history of Panama, the government has repeatedly tried to solve fundamental economic problems with a variety of programs, but always returned to the Canal as the countrys greatest resource.22 The statistics support LaFebers claim. While The United States had control of the Zone, Panama was only receiving between $1.9 and $2.3 million in annual profits.23 By December 31, 1999, the date that transfer of power was complete, the government of Panama was receiving

17

LaFeber, pg 225.

18Ibid, pg 227.

Bianco. Ibid. 21 LaFeber, pg 227. 22 Ibid. 23 Ibid.

19 20

approximately $135 million annually.24 To solidify the point, the canal has managed to double the annual payment it makes to the government of Panama from $135 million in 1999 to $270 million in 2002.25 This drastic boost in economic payment to Panama has allowed for some development of this nation, however that development is only reaching a select portion of the population, as the government has yet to truly expand projects beyond their personal benefit.26 However much of the reason for the increase in payment comes from the increase in tolls, and Bob Cullen argues that these tolls are beginning to reach an amount that may cause ships to seek alternate routes. Much of the profit of the canal has to be reinvested, as it has been in operations for more than 100 years, and requires increasing maintenance and expansion projects. It is clear that if Panama wishes to grow its economy in the future, it must look beyond the canal. As Bob Cullen says, The canal is not a spigot that spits out money.27 He argues that although the Canal has provided enormously for the Panamanian economy, it cannot continue to be relied on. Panamanians have begun to approach privatization and foreign management in other sectors of the country, as a solution to the decline in popularity of the canal. A joint venture created by the Kansas City Southern Railroad and Mi-Jack, an Illinois company, has lead to the restoration and creation of several railroads.28 Major ports on both the Atlantic and Pacific sides of the canal are run now by Hutchison-Whampoa, Ltd., a Hong Kong firm, and the Panamanian government has sold its electrical utilities to several foreign-owned companies.29 This new trend in Panama

24Cullen.

Ibid. Idid. 27Ibid. 28 Cullen. 29 Ibid.

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begins to show a striking resemblance to the colonialism of the United States, which Panama fought so hard to correct. However, Cullen argues that, the Panamanians I met were less concerned with colonialism than with making a living in a poor country under the auspices of a government plagued by corruption.30 The canals influence on the government and the economy has declined, and recently the most present controversy of the canal revolves around environmental issues. Bob Cullen believes that many Panamanians can become a part of the emerging tourist industry in that country, but environmental protection of Panamas rain forests, which are affected by the canal, is the only way to actively advance this tourist economy.31 Following the development into the new century, scholars have realized that although the Panama Canal has been an important resource for the country, its influence on the economy and politics has weakened. With political corruption in Panama, the country has had a stifled growth, but the growing economic ventures in tourism and privatization have allowed for Panamanians to maintain themselves with lessening profits and job opportunities from the canal. Scholars are in agreement that the Panama Canal paid off for the people of Panama and created immediate political stabilization, economic growth, and an overall sense of increased nationalism. Despite the weakening of these effects, scholars are still in agreement that the transfer of power of the Panama Canal was a very positive event in Panamas history.

30 31

Cullen. Ibid.

Bibliography Books: Dolan, Edward F. Panama and the United States: Their Canal, Their Stormy Years. New York: F. Watts, 1990. Print. Falcoff, Mark. Panamas Canal: What Happens When the United States Gives a Small Country What It Wants. Washington, D.C.: AEI, 1998. Print. LaFeber, Walter. The Panama Canal: The Crisis in Historical Perspective. New York: Oxford UP, 1978. Print. Internet: Bianco, Adriana. "Coqui Caldern." Americas 63.6 (2011): 58. Web. 9 Apr. 2013. Cullen, Bob. "A Man, A Plan, A Canal: Panama Rises." Smithsonian 34.12 (2004): 44. Web. 8 Apr. 2013. Zaretsky, Natasha. "Restraint Or Retreat? The Debate Over The Panama Canal Treaties and U.S. Nationalism After Vietnam." Diplomatic History 35.3 (2011): 535. Web. 9 Apr. 2013.